1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ___________.
Commission File Number 1-5725
A. Full title of the plan and the address of the plan, if different from
that of the issuer name below:
Quanex Corporation Employee Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Quanex Corporation
1900 West Loop South, Suite 1500
Houston, Texas 77027
(713) 961-4600
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INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Quanex Corporation Employee Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Quanex Corporation Employee Savings Plan (the "Plan") as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1996 and 1995, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of (1) investments as of December 31, 1996 and (2) 5% reportable transactions
for the year ended December 31, 1996 are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These schedules are the responsibility
of the Plan's management. Such schedules have been subjected to the auditing
procedures applied in our audit of the basic 1996 financial statements and, in
our opinion, are fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
March 28, 1997
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QUANEX CORPORATION EMPLOYEE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
--------------------------
1996 1995
----------- -----------
Assets:
Investments at fair value -
Mutual fund assets:
Fidelity Puritan Fund $ 7,990,942 $ 6,212,219
Fidelity Magellan Fund 9,025,079 8,297,683
Fidelity Contrafund 3,106,854 1,126,654
Fidelity Growth and Income Fund 4,187,289 2,098,750
Fidelity Overseas Fund 2,151,256 1,573,296
Fidelity Balanced Fund 272,553 158,122
Templeton Foreign Fund 476,234 --
Fidelity Government Money Market Fund 10,265,488 10,910,320
Quanex Corporation common stock 1,822,006 1,519,737
Common/commingled trust 807,949 1,244,993
----------- -----------
40,105,650 33,141,774
Employee contributions receivable 446,619 449,920
Employer contributions receivable 142,213 128,560
----------- -----------
Total 588,832 578,480
Net assets available for benefits $40,694,482 $33,720,254
=========== ===========
See notes to financial statements.
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QUANEX CORPORATION EMPLOYEE SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
December 31,
--------------------------
1996 1995
----------- -----------
Investment income:
Interest and dividends $ 3,420,494 $ 1,708,988
Net appreciation in fair value of investments 1,154,013 2,926,558
----------- -----------
Total 4,574,507 4,635,546
----------- -----------
Contributions:
Employer 1,003,456 969,303
Less forfeitures 13,691 8,913
----------- -----------
989,765 960,390
Employee 3,671,185 3,734,966
----------- -----------
Total 4,660,950 4,695,356
----------- -----------
Total additions 9,235,457 9,330,902
Benefit payments 2,261,229 2,278,666
----------- -----------
Increase in net assets available
for benefits 6,974,228 7,052,236
Net assets available for benefits:
Beginning of year 33,720,254 26,668,018
----------- -----------
End of year $40,694,482 $33,720,254
=========== ===========
See notes to financial statements.
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QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
A. THE PLAN
The following brief description of the Quanex Corporation Employee Savings
Plan (the "Plan") is provided for general information purposes only.
Participants should refer to the Plan agreement for more complete
information.
(1) General. The Plan became effective April 1, 1986, as amended and
restated effective January 1, 1989, and is sponsored by Quanex
Corporation (the "Company"). The Plan is a defined contribution plan
which is subject to the Employee Retirement Income Security Act of
1974 ("ERISA"). The Plan is a voluntary savings plan in which
employees of the Company and its subsidiaries, excluding the
Nichols-Homeshield division and Piper Impact subsidiary, and those
Quanex employees who are covered by a collective bargaining
agreement, are eligible to participate after completing three months
of active service. The assets of the Plan are held in trust by
Fidelity Management Trust Company ("Fidelity" or the "Trustee"). The
Benefits Committee (the "Committee"), appointed by the Board of
Directors of the Company, serves as the Plan administrator.
(2) Contributions. Participants may elect to contribute up to 15% of
their pre-tax annual compensation or up to 15% of their after-tax
annual compensation limited to 15% of considered compensation as
defined by the Plan agreement. The Company matches 50% of the
employee's contribution up to, but not in excess of, 2.5% of the
employee's annual compensation.
(3) Participants Account. Each participant's account is credited with the
participant's contribution, the Company's matching contribution, and
an allocation of investment income, which is based on the
participant's account balance as of the end of the period in which
the income is earned.
(4) Investment Options. The Plan offers the following investment funds,
all managed by the Trustee, as follows:
Government Money Market Fund-composed of short-term government
obligations.
Puritan Fund-invested and reinvested in common and preferred stocks
and bonds.
Magellan Fund-invested and reinvested in equity and debt securities
of foreign and domestic companies.
Growth and Income Fund-invested and reinvested in equity and debt
securities of foreign and domestic companies.
Overseas Fund-invested and reinvested in foreign securities.
Balanced Fund-invested and reinvested in common and preferred stocks
and bonds.
Contrafund-invested and reinvested in equities of foreign and
preferred stock.
Templeton Foreign Fund -invested and reinvested in foreign
securities.
Quanex Corporation Common Stock-invested and reinvested exclusively
in the common stock of Quanex Corporation.
Common/Commingled Trust-invested and reinvested in investment
contracts issued by insurance companies, banks and other financial
institutions.
(5) Vesting. Participants are immediately vested in their voluntary
contributions and the related earnings. Vesting in the employer's
matching contributions for employees is 0% for less than one year of
service graduating to 100% for five or more years. Upon death,
retirement or total and permanent disability, the participant or
beneficiary becomes immediately 100% vested in the employer's
contribution. In the event of termination, nonvested portions of
employer's contributions are immediately forfeited by participants
and utilized to reduce future employer matching contributions.
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(6) Payment of Benefits. Upon termination of service, the participant may
elect to receive a lump-sum amount equal to the amount of vested
benefits in his or her account. As of December 31, 1996 and 1995, net
assets available for benefits included benefits of $30,852 and
$221,024, respectively, due to participants who have withdrawn from
participation in the Plan.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting Basis. The financial statements of the Plan are prepared
on the accrual basis of accounting in accordance with generally
accepted accounting standards.
(2) Investment Valuation. The Plan recognizes net appreciation or
depreciation in the fair value of its investments. Investments are
reflected at fair value in the financial statements. Fair value of
mutual fund assets is determined using a quoted net asset value. Fair
value for Quanex Corporation common stock, which is listed on the New
York Stock Exchange, is determined using the last recorded sales
price. The fair value of the common/commingled trust is at face
value.
(3) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires the
use of estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of changes in the net assets available for
benefits during the reporting period. The Plan's financial statements
include amounts that are based on management's best estimates and
judgments. Actual results could differ from those estimates.
(4) Administrative Expenses. The Company pays all administrative
expenses.
(5) Payment of Benefits. Benefit payments are recorded when paid.
C. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan, subject to the provisions of
ERISA. In the event of termination of the Plan, the assets held by the
Trustee under the Plan will be valued and fully vested, and each
participant will be entitled to distributions respecting his or her
account.
D. FEDERAL INCOME TAX STATUS
The Plan is subject to specific rules and regulations related to employee
benefit plans under the Department of Labor and the Internal Revenue
Service ("IRS"). The Plan is a qualified trust under Sections 401(a) and
401(k) of the Internal Revenue Code (the "Code") and, as a result, is
exempt from taxation under Sections 501(a) of the Code. The Plan received
a favorable determination letter from the IRS dated October 3, 1996. The
Company believes that the Plan is currently designed and being operated in
compliance with the applicable requirements of the Code. Therefore, it
believes the Plan was qualified and the related trust was tax-exempt as of
the financial statement dates.
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E. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1995, the Plan purchased and
sold shares of Quanex Corporation common stock, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 18,195 $403,216 31,540 $656,408
Sales 30,076 618,301 $741,499 15,119 322,891 $368,385
During the years ended December 31, 1996 and 1995, the Plan purchased and
sold shares of Fidelity mutual fund assets, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 3,781,125 $ 15,764,549 5,924,023 $13,115,404
Sales 4,142,244 8,854,715 $9,179,359 3,911,470 8,630,838 $9,131,908
During the years ended December 31, 1996 and 1995, the Plan purchased and
sold shares of Fidelity Common/Commingled Trust, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 396,185 $396,185 952,231 $952,231
Sales 833,229 833,229 $833,229 179,211 179,211 $179,211
F. SUBSEQUENT EVENT
In April 1997, Quanex Corporation announced the sale of their LaSalle
Steel Company subsidiary ("LaSalle") to Niagara Corporation.
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G. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund are as
follows for the years ended December 31:
1996 1995
---------- ----------
Employee Contributions:
Fidelity Puritan Fund $ 631,064 $ 667,357
Fidelity Magellan Fund 909,697 1,139,936
Fidelity Contrafund 325,350 126,372
Fidelity Growth and Income Fund 381,285 230,475
Fidelity Overseas Fund 227,957 230,121
Fidelity Balanced Fund 40,829 26,265
Fidelity Government Money Market Fund 953,608 1,109,768
Templeton Foreign Fund 17,898 --
Quanex Corporation common stock 117,769 122,282
Common/commingled trust 65,728 82,390
---------- ----------
$3,671,185 $3,734,966
========== ==========
1996 1995
---------- ----------
Employer Contributions:
Fidelity Puritan Fund $ 172,119 $ 178,592
Fidelity Magellan Fund 242,159 256,350
Fidelity Contrafund 83,610 31,385
Fidelity Growth and Income Fund 95,579 56,557
Fidelity Overseas Fund 60,383 61,502
Fidelity Balanced Fund 11,115 7,216
Fidelity Government Money Market Fund 268,082 313,266
Templeton Foreign Fund 4,332 --
Quanex Corporation common stock 37,089 37,418
Common/commingled trust 15,297 18,104
---------- ----------
$ 989,765 $ 960,390
========== ==========
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1996 1995
----------- -----------
Benefit payments:
Fidelity Puritan Fund $ 331,862 $ 382,406
Fidelity Magellan Fund 529,329 441,687
Fidelity Contrafund 29,696 4,154
Fidelity Growth and Income Fund 116,336 78,206
Fidelity Overseas Fund 57,153 143,802
Fidelity Balanced Fund 2,476 1,628
Fidelity Government Money Market Fund 859,097 1,171,681
Templeton Foreign 292 --
Quanex Corporation common stock 92,241 42,219
Common/commingled trust 242,747 12,883
----------- -----------
$ 2,261,229 $ 2,278,666
=========== ===========
1996 1995
----------- -----------
Investment income:
Fidelity Puritan Fund $ 1,005,808 $ 1,062,499
Fidelity Magellan Fund 977,164 2,263,096
Fidelity Contrafund 443,202 181,608
Fidelity Growth and Income Fund 591,891 489,667
Fidelity Overseas Fund 241,670 126,585
Fidelity Balanced Fund 22,680 14,721
Fidelity Government Money Market Fund 515,358 585,772
Templeton Foreign 30,573 --
Quanex Corporation common stock 685,994 (145,524)
Common/commingled trust 60,167 57,122
----------- -----------
$ 4,574,507 $ 4,635,546
=========== ===========
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ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
EIN: 38-1872178; PN 012
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Shares/ Current
Par Value Cost Value
--------- ---- -----
Mutual Fund Assets - Fidelity Investments:
- ------------------------------------------
Contrafund* 73,709 $ 2,818,915 $ 3,106,854
Government Money Market Fund* 10,265,488 10,265,488 10,265,488
Puritan Fund* 463,512 7,404,337 7,990,942
Growth and Income Fund* 136,261 3,494,225 4,187,289
Magellan* 111,904 8,262,703 9,025,079
Overseas Fund* 69,755 1,957,919 2,151,256
Balanced Fund* 19,357 255,546 272,553
Templeton Foreign Fund* 45,969 462,601 476,234
------------ ------------
Total Mutual Fund Assets 34,921,734 37,475,695
Quanex Corporation Common stock* 66,557 1,401,349 1,822,006
Common/Commingled Trust* 807,949 807,949 807,949
---------- ----------
Total investments $37,131,032 $40,105,650
=========== ===========
* Party-in-Interest
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ITEM 27d - SCHEDULE OF REPORTABLE (5%) TRANSACTIONS EIN 38-1872178; PN 012
QUANEX CORPORATION EMPLOYEE SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF 5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Single of Transactions
Current
Total Number of Total Number Value on Net
Purchases During Purchase of Sales During Selling Cost of Transaction Gain
Description Plan Year Price Plan Year Price Asset Date (Loss)
- ----------- ----------- ------- ----------- ------- ------- ------ ------
None
Series of Transactions
Current
Total Number of Total Number Value on Net
Purchases During Purchase of Sales During Selling Cost of Transaction Gain
Description Plan Year Price Plan Year Price Asset Date (Loss)
- ----------- ----------- ------- ----------- ------- ------- ------ ------
*Puritan Fund 117 $2,676,360 65 $1,037,920 $943,415 $1,037,920 $ 94,505
*Magellan Fund 122 3,466,175 84 2,324,953 2,194,773 2,324,953 130,180
*Growth & Income Fund 125 2,244,476 44 558,617 514,966 558,617 43,651
*Contrafund 116 2,391,321 38 658,318 640,714 658,318 17,604
*Government Money Market Fund 137 3,346,494 130 3,991,325 3,991,325 3,991,325 0
- -----------------------
*Party-in-interest
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Quanex Corporation Employee Savings Plan
Date: June 24, 1997 /s/ Joseph K. Peery
--------------------------- ----------------------------------------
Joseph K. Peery, Benefits Committee
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INDEX TO EXHIBITS
23.1 Independent Auditor's Consent
1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-38702 of Quanex Corporation on Form S-8 of our report dated March 28, 1997
appearing in the Annual Report on Form 11-K of the Quanex Corporation Employee
Savings Plan for the year ended December 31, 1996.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
June 24, 1997
